The 2018 income statement of Anderson Medical Supply Company reported net sales

Question

The 2018 income statement of Anderson Medical Supply Company reported net sales of $7 million, cost of goods sold of $5.0 million, and net income of $810,000. The following table shows the company's comparative balance sheets for 2018 and 2017:

Required:
1. Calculate Anderson's turnover ratios for 2018. (Consider 365 days a year. Round your answers to 2 decimal places.)
Inventory Ratio , recievables ratio . Average collection period, asset turnover ratio.

($ in 000s) 2018 2017 Assets Cash $ 340 $ 420 Accounts receivable 740 520 Inventory 1,000 800 Property, plant, and equipment (net) 2,600 2,320 Total assets $ 4,680 $ 4,060 Liabilities and shareholders’ equity Current liabilities $ 1,000 $ 870 Bonds payable 1,300 1,300 Paid-in capital 1,200 1,200 Retained earnings 1,180 690 Total liabilities and shareholders' equity $ 4,680 $ 4,060

Explanation / Answer

1 Inventory turnover ratio Cost of good sold/Average stock      5.56 =5000000/((1000000+800000)/2) 2 Account receivable turnover ratio Net credit sales/Average account receivable    11.11 =7000000/((740000+520000)/2) 3 Average collection period Days in a year/Account receivable turnover ratio    32.85 =365/11.11 4 Total assets turnover ratio Net Sales/Total Assets      1.50 =7000000/4680000

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